Homebuilder ETFs were climbing on high trading volume Tuesday after an index of industry confidence revealed sentiment rose to its highest level since May 2007.
The National Association of Home Builders/Wells Fargo Housing Market Index rose to 29 in May from 24 the previous month, more than economists had expected.
XHB was up 23.7% year to date as of May 14, compared with a 7.4% rise for iShares S&P 500 (NYSEArca: IVV), according to Morningstar.
Builder ETFs are outperforming the market on hopes a turnaround in the U.S. housing market will help the beaten-down sector.
“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” said Barry Rutenberg, NAHB chairman, in Tuesday’s index release. “It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.”